Kone Elevators India Pvt. Ltd. Vs. Commissioner of Service Tax, Chennai - Court Judgment

Per D.N.Panda, J.

1. Being aggrieved by the consequence of

Order-in-Original dt. 22.12.2008, the appellant carried grievance to the Tribunal submitting that composite contract for supply of elevators/escalators for residential and commercial building sizably involved material components and amounting to sale of goods  without substantially involving providing of service and is not taxable under Finance Act, 1944 as commissioning and escalation service provided.

2. Moving the stay application, ld. Counsel submitted that at page 10 of the adjudication order, the quantum of service was depicted by the adjudicating authority from invoice and noticed that 15% of the contract value was claimed to be value of service and that was cum tax value towards erection and installation and hence service tax liability was discharged on that. The authority did not believe that 15% of the contract value shall be service element and imposed service tax to the extent of Rs.15,02,30,497/- followed by equal penalty under Section 78 of the Finance Act, 1944 and interest on the tax demanded. There was no levy of penalty under Section 76 for no ground available to impose the same.  Had the authority properly considered the pleadings of the appellant made in the grounds of appeal, there would not have been any liability to service tax because substantial value of the contract has suffered tax bringing sale of goods involved to tax. Therefore, not only the predeposit may be waived but also appeal may be decided.

3. Ld. SDR, on behalf of Revenue, supports the adjudication order.

4. Heard both sides and perused the records. Prima facie, it appears that the entire period of adjudication involved was June 05 to Sept 07 and summarily it appears that appellants acted on the basis of a contract document available at page 56 of the appeal folder. That document exhibits that the appellant had supplied elevators/escalators followed by commissioning and installation thereof. The adjudication order does not reveal whether it was the only document available as is appearing at page 56 gives rise to demand or any other contract that was executed during the period under adjudication. So also it appears that a summary of examination was made by the adjudicating authority with a determination that service tax shall be leviable without examination of the factual aspect of the quantum of goods involved in respect of each contract executed. We may make it clear that Finance Act, 1994 is not commodity taxation law. It requires service declared as taxable service by law is to be taxed  to the extent permitted by law.  There were various pleas about the classification of service raised in the course of hearing. The appellant has also raised several grounds in its memorandum of appeal. While the quantum of levy is under challenge, also abatement whether permissible or not is not left unassailed.  It would therefore be required to be examined each and every invoice involved for the period under adjudication and to arrive at a proper conclusion excluding the sale of goods, if any, from taxation, bringing out clearly the service aspect appropriately classifiable under taxing entry under Section 65 of the Finance Act, 1944 subject to permissible abatement, if any and tax.

5. In view of our preliminary observations as above, we have viewed that as revenue stake being very high, it would not be proper to keep the matter pending in Tribunal but to send it back for threadbare examination by original authority at the earliest.  Therefore, dispensing predeposit, the matter is remitted to the adjudicating authority to determine incidence of levy and quantum of levy in accordance with law after granting fair opportunity of hearing to the appellant to adduce evidence it relies on material facts brought on record.

6. Both the stay application and appeal are disposed off in the manner indicated as above.